Question

i know they dont write conversion cost but they write labor its the same thing correct,...

i know they dont write conversion cost but they write labor its the same thing correct, as far as the units involve is it total to 1,200,000 accounted for can you help me with this problem, please

You are employed by Spirit Company, a manufacturer of digital watches. The company’s CFO has asked that you determine the costing information for past year. You have the following information available to you to complete this process.

Materials are added to production at the beginning of the manufacturing process, and overhead is applied to each product at the rate of 60% of direct labor cost. The ending WIP inventory is 50% complete as to conversion costs. There was no Finished Goods inventory at the beginning of the year (all prior year finished goods were sold) and 200,000 units at the end of the current year. A review of Spirit’s inventory and cost records has disclosed the following data:

                        Costs

                                                                            Units         Materials         Labor

WIP, January 1 (conversion 80% complete)      200,000           $200,000      $315,000

Units started into production                           1,000,000

Costs added during the year:

     Materials cost                                                                     $1,300,000

     Labor cost                                                                                               $1,995,000

Units completed during the year                       900,000

The company uses the weighted average method.

Required

Determine the equivalent units and costs per equivalent unit for materials and conversion costs.
What are the ending cost balances in the WIP and Finished Goods inventory?
Determine the cost of goods sold for the year (assume no over- or under-applied overhead).

Homework Answers

Answer #1
UNITS TO ACCOUNT FOR:
Beginning Work in Process units 200,000
Add: Units Started in Process 1,000,000
Total Units to account for: 1,200,000
UNITS TO BE ACCOUNTED FOR:
Units started and completed 900,000
Ending Work in Process 300,000
Total Units to be accounted for: 1,200,000
Equivalent Units:
Material Cost Conversion
% Completion Units % Completion Units
Units started and completed 100% 900,000 100% 900,000
Ending Work in Process 100% 300,000 50% 150,000
Total Equivalent units 1,200,000 1,050,000
TOTAL COST TO ACCOUNT FOR:
Material Conversion
Beginning work in Process 200,000 504,000
Cost Added during May 1,300,000 3,192,000
Total Cost to account for: 1,500,000 3,696,000
Total Cost to account for: 5,196,000
COST PER EQUIVALENT UNIT:
Material Conversion
Total cost added during the year 1,500,000 3,696,000
Equivalent Units 1,200,000 1,050,000
Cost per Equivalent unit 1.25 3.52
TOTAL COST ACCOUNTED FOR:
Units Completed (21500 units)
Equivalent unit Cost per EU Total Cost
Material 900,000 1.25 1125000
Conversion Cost 900,000 3.52 3168000
Cost of Units completed 2537000
Ending WIP (3400 units)
Equivalent unit Cost per EU Total Cost
Material 300,000 1.25 375000
Conversion Cost 150,000 3.52 528000
Cost of Ending work in process 903000
Note: Overheads in Beginning WIP: $315000*60% = $189000
Therefore, Convesion cost in Beginning WIP= $315,000+189000 = 504,000
Overheads in Curren cost: $ 1995000*60% = 1197,000
Conversion cost of current year: $1995000+1197000 = $ 3192000
Req 1: Equivalent units:
Material: 1200,000 Units
Conversion: 1050,000 units
Cost per equivvalent units:
material: $ 1.25 pepr EUP
Conversion: $ 3.52 per EUP
Req 2: Cost of Ending WIP: $ 903,000
Req 3: Cost of goods sold:
Units produced: 900,000
Ending Units Inventory: 200,000
Sold units: 900,000-200,000 =700,000
Cost per unit: $ 4.77 per unit (1.25+3.52)
Cost of goods sold: 700,000 [email protected]= $3339000
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